Study suggests more traffic is related to stronger metro economies

What if traffic is not something to avoid but rather a byproduct of a strong economy?

By comparing historic traffic data against several economic markers, the authors found virtually no indication that gridlock stalled commerce. In fact, it looked like the economy had its own HOV lane. Region by region, GDP and jobs grew, even as traffic increased. This does not mean speed bumps should come standard on every new highway. Traffic still sucks, and things that suck should be fixed. What this study does is acknowledge that economically vibrant cities will always have congestion. So transportation planners should instead focus on ways to alleviate the misery rather than eliminate the existence of congestion…

Marshall acknowledges that no statistic can paint a perfect picture of reality, but he says he and his coauthor wrangled their analysis into coherence. Once they accounted for all the hanging chads, the overall trend was pretty clear: Traffic really didn’t do much to the economy. In fact, they found that if anything, places with higher car congestion seemed to have stronger economies. Specifically, per capita GDP and job growth both tracked upward as traffic wait times got worse.

It sounds like the study suggests the better the economy is, the more traffic there will be. I could think of two observations that go with these findings:

  1. The idea of ghost towns, both literal and figurative. If there is a lack of economic activity, the streets and buildings will be pretty empty.
  2. Jane Jacobs argued the most interesting neighborhoods are those with a lot of street and sidewalk activity. This is certainly related to economic activity of businesses, shops, and restaurants as well as the ability of residents and visitors to spend money.

Even if this is true, I would guess this knowledge would do little to help people stuck in gridlock feel better about the situation. They should think “I’m glad I have a good job in a thriving metro area and the traffic is the small penalty to pay for that.”

Perhaps a final piece to this would be to think about what would need to change in urban areas or driving to decouple these factors. Would a significant investment in mass transit counter this connection? More telecommuting and working from home?

The declining value of shopping mall real estate

The declining shopping mall has led to a drop in value for these properties:

“It’s a tough environment. I don’t think anybody really anticipated the decline of the department store to happen as quickly as it did,” said Joe Coradino, chief executive officer of Pennsylvania Real Estate Investment Trust, which owns 21 malls in the Mid-Atlantic region. “The sellers are clearly on their knees.”

The Philadelphia-based REIT has sold 17 bottom-tier malls since 2013. The last deal, completed in September, was a $33.2 million transaction for the Logan Valley Mall in Altoona, Pennsylvania, anchored by Macy’s, JCPenney and Sears stores. If those same properties were on the market today, prices would be substantially lower, Coradino said…

Not long ago, some of the biggest names in private equity, such as KKR & Co. and Barry Sternlicht’s Starwood Capital Group, were laying out substantial sums to snap up retail properties. In 2012 and 2013, Starwood purchased a combined $2.6 billion of malls from Westfield, followed less than a year later by a $1.4 billion deal to buy seven malls from Taubman Centers Inc. From 2012 to 2014, KKR bought four regional malls for about $502 million, Real Capital data show. That demand has all but evaporated as timing a wager on American malls becomes increasingly treacherous…

It’s easy to understand their reluctance to sell now. Prices for malls fell 14 percent in the past 12 months, even as values for other types of commercial properties, such as warehouses and office buildings, rose or held steady, according to Green Street Advisors LLC. At least four properties have been pulled from the market in recent months because the bids were too low, Dobrowski said.

Even with efforts to save some shopping malls, from adding restaurants and entertainment options, housing, and community spaces, a good number will simply not survive. They will not be desirable enough for retail activity nor prime spots for redevelopment. They may sit empty for much longer than communities desire or can bear. I suspect we will see a lot of potential creative solutions to these dead shopping malls as land owners, developers, and communities try to turn them into sites that again contribute to the surrounding area.

Perhaps the most interesting question here is how low prices will get before they interest someone who will buy them. Are we headed for the equivalent of $1 homes for shopping malls? Perhaps they will become subject to blight and renewal programs? Will the price be low enough for neighbors or communities to buy them simply to raze them? Perhaps they will be the dystopian spaces featured in films like Gone Girl?

Would new local taxes on large tech firms really cause them to leave Silicon Valley?

Several communities in Silicon Valley are considering levying special taxes on large companies, possibly affecting some of the biggest tech companies:

Cupertino, Mountain View and East Palo Alto have begun to ponder new taxes based on employer headcounts — levies that could jolt Apple and Google — and if voters endorse the plans, a fresh wave of such measures may roll toward other corporate coffers.

Alarmed by traffic and other issues brought on by massive expansion projects, the three Silicon Valley cities are pushing forward with separate plans to impose new taxes that could be used to make transit and other improvements…

A lot of factors point to this being a prime time for efforts such as these. San Francisco ranked fifth worst for traffic congestion in the world — and third worst in the U.S. — last year, according to INRIX Global Congestion Ranking. Record housing prices in 2018 boosted the median price of a single family home in the Bay Area to a record $893,000 in April, according to a CoreLogic report.

Federal tax cuts also have improved the balance sheets on an array of U.S. companies, large and small. Silicon Valley’s largest tech companies have contributed to the gridlock on freeways and soaring housing costs as they’ve grown rapidly in recent years, with brisk hiring and expansion in unexpected areas and mega-leases that gobble up huge swaths of office space.

If this works the way that some would argue it does, then the local taxes will be viewed by the tech companies as an unnecessary burden for their operations. They should then consider moving elsewhere where they are not subject to such local taxes. Indeed, if they wanted to move sizable operations, they could probably get numerous communities to offer them tax breaks.

However, this assumes that the local taxes are the primary factor that determines where companies and organizations locate. Instead, there are a variety of factors that both support and work against staying in their current location. I assume these are important reasons for why Apple, Facebook, Google, and others are in this location: the construction and maintenance of large headquarters, proximity to other like-minded organizations, an talented employee pool nearby, and the proximity to major cities like San Jose and San Francisco. Are local tax issues more important than these other concerns? Probably not. And even if they are, it would take some time before a large organization could significantly alter their operations in response.

McMansion ad campaign aimed at McDonald’s

Burger King has a new advertising campaign that shows off one particular feature of the purported McMansion backyards of McDonald’s executives:

Each of the company’s newest print ads, designed by an agency called DAVID Miami, claims to show what was once the lavish backyard of a real McDonald’s executive, the kicker being that each yard also appears to contain a grill.

“Flame grilling is hard to resist,” read the words printed over each grilling apparatus, the suggestion being that McDonald’s executives themselves preferred a flame-grilled patty…

AdAge reports that some of the photos were taken from real estate listings, meaning these particular grills may not have necessarily belonged to the “retired McDonald’s director” or “retired McDonald’s president” who may have used those backyards.

The primary emphasis is on the grill, a staple of many an American backyard. American homes and summer has long been associated with a male homeowner taking raw meat to the backyard and cooking it on the grill as the family plays and gathers around.

Of course, these are not just any grills or any homes. The news story includes three ad images. The grills look rather long – so they likely have more than four burners – and they have a stainless steel exterior. (In one image, there appears to be a Green Egg next to the stainless steel grill.) Given that these are grills supposedly owned by executives plus they are located at large homes, these are likely expensive grills.

Beyond tying McDonald’s executives to expensive grills, this also connects them to undesirable homes: McMansions. While the purpose of the ads is the grills, these grills are in front of expensive and large homes. But, they are not just mansions – they are McMansions. I’m not sure if there is a larger message here or not: should McDonald’s feel shame about having derided homes named after their restaurants (the Mc- prefix)? (Compared to the fast food of Burger King, this seems like a better pitch for places like Five Guys or Smashburger that would claim to have a more premium burger.) Does this suggest their executives have bad taste? Does this mean Burger King executives have nicer homes?

 

When bricks and mortar stores can’t make it even in Manhattan

Heart of one of the world’s leading global cities, Manhattan has its own struggles with keeping brick and mortar retailers in operation:

That’s right: On a nine-block stretch of what’s arguably the world’s most famous avenue, steps south of the bustling Time Warner Center and the planned new Nordstrom department store, lies a shopping wasteland.

Yes, there are bank branches, restaurants, fast-food outlets, theaters, Duane Reades, a vitamin shop and a few tourist-targeted “discount” stores. But mainly there are oodles of empty spaces covered with signs touting SUPERB CORNER RETAIL OPPORTUNITY.

The same crisis blights the rest of Manhattan. The people invested in storefront retailing — real-estate developers, landlords and retail companies themselves — tell us not to worry. It’s a “transitional” situation that will right itself over time. Authoritative-sounding surveys by real-estate and retail companies claim that Manhattan’s overall vacancy is only just 10 percent.

But they are all wrong. Bricks-and-mortar retail is shrinking so swiftly and on such a wide scale, it’s going to require big changes in how we plan our new buildings and our cities — although nobody wants to admit it.

This is an interesting argument to make: even with all of the tourists, wealth, and attention bestowed upon the borough, retail is disappearing from Manhattan. And if shopping disappears, with shopping being one of the favorite leisure activities of Americans, might this negatively affect the business and social life of a Manhattan used to ultra-busy sidewalks?

On the other hand, Manhattan may not be the best example. The median household income in Manhattan is not as high as one might expect, there is not much of a middle class, and the cost of living is high. Add in that Manhattan does have a lot of tourists, workers that arrive for the day and leave at night, and concentrations of residents in different parts of the island. The sheer density of people might suggest that retailers should be able to make it in Manhattan but it is a complicated place.

More broadly, what will tourist locations of the future look like if even more shopping is done online? For decades, the international tourist destination includes significant amounts of shopping. What would fill that space?

Speculation: more Americans choose to pursue unretirement to find meaning

Various data points show more Americans continuing to work even when do not need the money at retirement age:

Unretirement is becoming more common, researchers report. A 2010 analysis by Nicole Maestas, an economist at Harvard Medical School, found that more than a quarter of retirees later resumed working. A more recent survey, from RAND Corporation, the nonprofit research firm, published in 2017, found almost 40 percent of workers over 65 had previously, at some point, retired…

Even more people might resume working if they could find attractive options. “We asked people over 50 who weren’t working, or looking for a job, whether they’d return if the right opportunity came along,” Dr. Mullen said. “About half said yes.”

Why go back to work? We hear endless warnings about Americans having failed to save enough, and the need for income does motivate some returning workers. But Dr. Maestas, using longitudinal data from the national Health and Retirement Study, has found that the decision to resume working doesn’t usually stem from unexpected financial problems or health expenses…

Researchers note that older workers have different needs. “Younger workers need the paycheck,” Dr. Mullen said. “Older jobseekers look for more autonomy, control over the pace of work. They’re less concerned about benefits. They can think about broader things, like whether the work is meaningful and stimulating.”

One of the primary ways that adult Americans find meaning is in their jobs. Not only does a job help pay the bills, a job has become a reflection of who you are. Think of that normal question that leads off many an adult conversation: “What do you do?” With a shift away from manufacturing and manual labor jobs, service and white-collar jobs can encourage the idea that our personality and skills are intimately tied up with our profession.
Put this emphasis on an identity rooted in a job or career together with a declining engagement in civic groups and a mistrust in institutions. Americans are choosing to interact less with a variety of social groups and this means they have fewer opportunities to find an identity based in those organizations. We are told to be our own people.
Imagine a different kind of retirement than the one depicted in this article: older Americans finish a long working career and then find time to get involved with extended family life or various causes, secular and religious, where they can provide both expertise and labor. Where would many congregations or civic groups be without the contributions of those who are retired and now can devote some more time to the public good? What if the child care needs that many younger families face be met with grandparents who could consistently help? What if retired Americans could regularly mentor children and teenagers who would benefit from wise counsel and a listening ear? That is not to say there are not plenty of retirees who do these things; however, this approach involves a broader look at life satisfaction that goes beyond a paying job.

Subprime mortgages still around

Although they do not appear to be anywhere near the common product as they were in the 2000s, subprime mortgages are still available:

Financial Times reports that subprime mortgage bond issuance doubled in the first quarter of 2018 compared to a year ago, going from $666 million to $1.3 billion. Furthermore, it quotes a financial analyst predicting that issuance for the year will hit $10 billion, which is more than double the $4.1 billion issued last year. For context, the value of American subprime mortgages was estimated at $1.3 trillion in March 2007.

Since the financial crisis, mortgage-backed securities have been almost entirely issued by government-sponsored mortgage facilitators Freddie Mac, Fannie Mae, and Ginny Mae. And since the financial collapse, those organizations have refused to insure subprime mortgages. The Dodd-Frank regulation passed after the collapse put tight rules around subprime lending that for awhile effectively killed the practice.

But over the last couple years, specialty firms have jumped back into the subprime market, rebranding it as “noprime.” Investors hungry for bonds with higher yields have generated enough demand for those loans to be secularized, just as they were in the run-up to the financial collapse. The result is a rapidly expanding subprime mortgage market.

That subprime mortgages would seep back into the market right now is curious, given the current state of housing. The slow pace of new home construction and few existing homes for sale has led to an inventory shortage that has pushed home prices well out of reach for many low- and middle-income prospective homebuyers.

Subprime mortgages could be lucrative for some, even if it is now widely recognized that they are not a good idea in general for potential homeowners or the broader market and society.

I think the bigger question is whether subprime loans could once again become a mainstream product. What if the housing market continues to be sluggish or potential buyers have a difficult time securing conventional loans or the market suddenly heats up and lots of people want mortgages? Even with the fallout and the long recovery after the burst housing bubble of the 2000s, someone within the next decade will make a public plea for loosening regulations on subprime mortgages or will suggest subprimes are a necessity for serving certain portions of the market.